Companies have also long called for more equality, especially in public tenders.
(Photo: dpa)
Beijing German companies plan to increase investment in the world’s second-largest economy despite uncertain growth prospects and heightened geopolitical tensions.
These are the findings of a lightning survey published by the German Chamber of Commerce in China (AHK China) on Thursday. 288 German companies operating in China participated in the survey, which was conducted in mid-May.
About a third of companies rated their business outlook as worse and expected lower profits than last September. At the time, China still had a strict zero-coronavirus policy, and businesses had been worried about the lockdown. Sentiment in Chinese industry also deteriorated in May, according to the official purchasing managers’ index for manufacturing.
Hubertus Troska, chairman of AHK China, said the current economic recovery was “less dynamic than many had hoped”. In addition, geopolitical tensions dampened expectations for a rapid improvement in the business environment.
Still, more than half of companies surveyed by AHK China expect to increase investment in the People’s Republic of China over the next two years to remain competitive in the important market. That’s slightly more than the previous year, but significantly lower than in 2020 and 2021. At that time, more than 70% of participating companies planned to increase their investment.
reasons for increased caution
The most important reasons for being more cautious were a cloudy economic outlook (58%), ongoing geopolitical tensions (42%) and China’s quest for economic independence (28%). The Chinese government is increasingly requiring companies operating in the country to produce locally and use domestic suppliers.
Hubertus Troska, chairman of AHK China, said the current economic recovery was “less dynamic than many had hoped”.
(Photo: dpa)
In order to adapt to the new reality, German companies in China are “traveling on two tracks”, says Jens Hildebrandt, managing director of AHK China. On the one hand, they rely more and more on localization, they produce in China for China.
On the other hand, they are increasingly looking for alternatives away from China to spread risk. However, only 6.6% of companies said they were withdrawing business from China due to geopolitical tensions.
>> Read here: Why Germany’s Recession – Four Reasons Why
Meanwhile, China’s sluggish recovery has led to growing calls for a stimulus package – including from German companies. Nearly two-thirds of those surveyed by AHK China want the government to boost consumer confidence. Because Chinese consumers’ hopes of spending their pandemic savings after the end of corona restrictions have yet to materialize.
longing for equality
Almost half of German companies want more legal certainty from the Chinese government in view of the upcoming German-Chinese government talks in Berlin on June 19.
On the other hand, the German economy in China is not worried about the recent corona wave in the People’s Republic of China.
(Photo: dpa)
Companies have also long called for more equality, especially in public tenders. Despite the difficulties, most respondents want to strengthen cooperation in areas such as decarbonization, smart manufacturing and mobility.
On the eve of the government talks, senior representatives of the German Chamber of Industry and Commerce (DIHK) also traveled to China to learn about the post-pandemic situation and discuss economic relations with China.
>> Read here: German medium-sized enterprises in China: One more shot from Taiwan and I will go bankrupt
DIHK Chairman Peter Adrian spoke about “confidence-building measures”. He has high hopes for the consultations between the German and Chinese governments on improving the framework conditions between China and Germany.
The consequences of the corona policy are still evident
Because there are also criticisms of the German government: 80% of companies complain that the waiting time for business visas for Chinese employees to travel to Germany is too long.
The reason is that the visa offices of the German embassies and consulates in China are understaffed. As the People’s Republic of China has been largely cut off from the outside world for nearly three years during the pandemic, staff there have been cut.
On the other hand, the German economy in China is not worried about the recent corona wave in the People’s Republic of China. According to experts, as many as 65 million people could be infected with the new coronavirus every week by the end of this month.
But the spread of the virus, which has led to mass lockdowns several times over the past year, has been largely ignored since the government declared it a common cold.
>> Read here: China’s exports plummet in May
The virus has lost its terror, and so has Germany’s own economy. But the long-term consequences of a strict zero-Covid policy are still evident. She has shown many foreign business representatives how arbitrary the Chinese government’s actions have been — undermining confidence in this important market.
more: German companies are making fewer deliveries to China – 4 reasons why